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Index funds are created to mirror the investment results of a specific market index. It can consist of either stocks or bonds in its portfolio, and these mutual funds differ in the strategies that they use to achieve returns parallel to their chosen index. Index funds oppose with non-index funds, which seek to improve on market returns instead of aligning with them.

There are advantages and disadvantages of using stock indexes and the index funds that trace them. An index fund is an imagined portfolio of securities signifying a specific portion of the wider market. It is typically made using the shares of leading companies in the economy or in a particular area of the economy. Today, this article will be tackling some of the disadvantages of index fund investing to help you widen your knowledge about this type of investing.

Absence of Drawback Protection

The stock market has ascertained to be a great investment in the long run, but over the years, it has had its fair share of ups and downs. Investing in an index fund, such as one that traces the S&P 500, will give you the advantage when the market is performing well, but also makes you totally exposed to the drawbacks. You can decide to limit your exposure to the index through shorting the index, or buying a put, an option contract providing right to the owner to sell a specified amount of an underlying asset at a set price within a specified time, against the index.

No Huge Gains

An index fund doesn’t have the ability to outdo the market the way managed funds do. This means that if you invest in an index fund you are disregarding the possibility of a huge gain. The top-performing non-index funds in a given year work better than an index fund in a year. However, the top-performing non-index funds may differ from year to year, so that under-performing years can stop the over-performing ones, while index fund’s performance remains more stable.

No Control Over Holdings

Indexes are set portfolios. If an investor purchase an index fund, he or she has no control over every holding in the portfolio. You may have certain companies that you want to own, such as a favorite bank or food company that you have found on the net and want to purchase. Likewise, in daily life, you may have events in your life that lead you to believe that one company is notably better than the other, maybe it has the best brands, management or customer service. As a result, you may want to invest particularly in that company and not in its rivals.

Reduced Personal Satisfaction

Investing can be distressing and nerve-wracking, especially during times of disorder. Choosing a certain stock may leave you constantly looking after quoted price, and can keep you awake at night, but these situations will not be prevented by investing in an index. You can still find yourself constantly checking on how the market is performing and being worried sick about the economic landscape. Above all these, you will lose the satisfaction and excitement of creating good investments and being profitable with your journey.

Funds are broken down into different categories. Fund category is a way of differentiating mutual funds in accordance to investment goals and main investment characteristics. This categorization permits investors to expand their money around in a mix of funds with different risk and return features. With stock funds, the basic categories are defined by the size of the companies in which the fund invests, large-cap, mid-cap and small-cap, and investment style, value, growth and blend of value and growth. In addition, specialty stock funds and international funds provide additional opportunities.

In this article, you will learn a few of the fund categories to help you further widen your knowledge about stock funds.

Stock fund is categorized by size

You might want to buy stock funds that invest in companies of different sizes, such as small-cap, mid-cap and large-cap companies, for the best diversification process. You can actually do this by selecting three different funds that invest in each sized company, or you can pick one wide fund that invests in all of them at once, maybe through a stock index fund.

Stock fund is categorized by type

You could invest in a fund that chooses only growth stocks, if you think that small growth stocks will outperform the market. On one hand, you could choose a fund that invests in value stocks, if you truly feel and think that they are the way to go.

Stock fund is categorized by region

You might also want to buy stock funds that invest in companies, not just in your country, but internationally as well. You can actually do this by adding an international fund to your mix. Just always make sure that you are completely aware what you are buying. An international fund might invest in stable regions like Europe, or it might invest in riskier developing market regions, such as Latin America, Eastern Europe and mainland Asia, or it could be all of the mentioned regions.

Stock fund is categorized by sector

You could also try to invest in a sector or a specialty fund that holds stocks in just one industry, such as energy, technology or financial. There is nothing wrong with placing a percentage of your total stock holdings to such funds, as long as you remember that a hot sector one year could actually crash the succeeding year. If you do choose to purchase such funds, make sure the rest of your stock fund holdings are well diversified. That will restrict your overall risk.

Economic indicators are sources of data used in a macroeconomic scale to be able to interpret present and future investment potentials or to be able to evaluate and grasp the overall health of a particular economy and an individual’s financial state. One type of an economic indicator is consumer confidence, which is also the same as consumer sentiment. This post will talk about consumer confidence in details and why is it important.

What is consumer confidence?

Consumer confidence refers to the amount or level of spending consumers takes part in. This is a statistical measurement influenced by opinions of the consumers. It simply means that it is the feeling of an individual relative to his or her own present financial situation along with the general health of the economy and the potential for an economic growth.

When does consumer confidence affect the markets?

Consumer confidence affects the market as there are investors who depend on a dynamic consumer spending conditions. When making investment decisions, one of the many indicators needed to look at is this particular concept.

Where did consumer confidence originate?

It was during the mid-20th century when consumer sentiment or confidence was established as an economic concept. It has become as an indicator that can greatly influence both economic and public policy and the stock markets in a broad-spectrum.

At that time, when consumer sentiment was regarded to be less positive, the markets react by becoming bearish and vice versa.

How do you translate consumer confidence?

Just like in the olden times, a high level of consumer confidence can indicate that consumers, generally, feel good about their financial status and their ability to acquire and maintain their jobs. If consumer confidence is high, then consumers are more likely to spend the amount of money they have and such tend to increase proportional to their thinking. On the other note, if consumer confidence is low, then consumers are less likely to spend their money.

Why is consumer confidence important?

As mentioned before, consumer confidence measures the level of confidence consumers have towards the general health of the economy. It also reveals how confident the public is towards the stability of their employment as well as their income. Consumer confidence then dictates a person’s economic decisions such as spending.

This in turn affects the economy. As consumer confidence increases, the economy expands. When the opposite happens, such as when the economy contracts, it can mean that consumer confidence decreases.

Conclusion

Consumer confidence and / or sentiment data is important since it can be utilized by a number of individuals such as investors, retailers, banks, manufacturers and even various government agencies to be able to assess their actions and to better strategize. Moreover, consumer confidence (or sentiment) is also helpful to help people push forward even such as the concept of a self-fulfilling prophecy. However people must still be careful because if the contrary happens, it can greatly affect a person’s financial position.

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Whether you are a student or a working individual, there will always be times that you will be needing money unexpectedly. This article will focus on means where you can make quick money the moment you need it.
Read on to find out some guaranteed ways on how to get the extra money you need.

1. You can opt to work for extra hours.

If you have your full-time job but you still find it inadequate for your needs and getting a raise is unlikely for the time being, then one way is to ask permission from your manager or supervisor if you can work overtime. Adding extra hours to your normal working schedule can guarantee you additional income every pay day.

2. You can try babysitting jobs.

If you got nothing to do during weekends and you love dealing with kids, you can offer taking care of them when their parents are not around or are too busy to look after their young ones.

You already enjoyed playing with kids plus you have that extra money you need in your pocket.

3. You can try referral programs.

If you think you have a wide social network, you can use that to your advantage. There are actually professionals (i.e. real estate agents, car dealers, insurance agents) who will be happy if you become a referral source for them in exchange of compensation.

Now, go over your list of friends and see if you have enough convincing power to persuade them try your offers.

4. You can sell your photos online.

If you have exceptional and creative photography skills you might want to sell your photos online for a fee. There are several online photographs providers that you may contact and check if they want to buy your photos for their own use.

5. You can consider tutoring jobs.

If teaching is one of the things you are passionate about, you can always consider doing it as a way to earn extra money. It has always been expressed that when you love what you are doing, you would not actually feel burdened doing it. Hence, you get paid for doing something dear to your heart.

There are a wide range of school subjects that you can choose from such as English, Mathematics, or it can also be offering to help other people’s kids with their school projects and assignments.

Conclusion
Your ultimate goal in life must not revolve around making quick cash whenever you need it. If you think that your financial situation is in a bad shape it is advisable to look into the financial aspect of your life and start making a change. Moreover, aside from making little amount of extra cash when you need it, you can always dream of making money for the rest of your life. That is why investing your money is one great way of growing it and ensuring that you will have enough funds until retirement age.

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You probably have heard about the saying “do not put all of your eggs in one basket” because if you do, you would not have anything left when the basket falls. The concept of diversification has been a long topic in the field of investing. By now, you may already know the basic meaning of diversification and it is making a wise distribution of your investments over the different sectors of the market.

In this article, you are going to learn the utmost importance of diversifying your portfolio and why you should do it immediately.

Diversify to Soften Drawbacks

As you diversify your portfolio, you lessen your risk for market defeat especially when a particular sector is under-performing. Asset allocation is a wise way to adapt to a changing market environment.

Since nobody can precisely predict the outcome of the market, diversification can be of help a lot to the investors and be able to survive even the most harsh market conditions. When the inevitable happens, your other investments can offset the losses.

Diversify to Maximize Returns

Aside from protecting the health of your portfolio, diversification also gives you the opportunity to maximize returns by investing in different areas that would have a different reaction to the current situation of the market. By allocating your investments among several different financial instruments, businesses and even categories, you are somewhat guaranteed against losses.

Diversify to Target Across the Board

This setup can be regarded as superior diversification. That is, diversifying your portfolio across the board. Normally, when investors diversify, they do it with several companies. But when you do across the board diversification, you target different types of industries.

The more your stocks become unconnected or unrelated with each other, the better and more advantageous it is for your portfolio.

Another across the board technique is diversifying among different asset classes (i.e. bonds and stocks, equity markets, etc.). When adverse events happen, such types of assets would react differently since you have a combination of asset classes. Just like what is expected, unpleasant movements in one class will be counterbalanced by the upbeat results from the others.

Diversify to Own More than Owning Just One

Another obvious reason why you should diversify is because it is better to own more stocks than just having one. Market experts suggest that optimal diversification is achieved when an investor owns at least 15 to 20 stocks expanded across several industries.

However, it is still important to apply proper risk tolerance to determine the right assortment of your own choice of assets.

Conclusion

Generally, market downturns and risks affect nearly every stock. Diversification may not completely protect your portfolio from risks or even guarantee elimination of chances of a loss, but it can help an investor manage the risks and reduce the impact of market volatility.

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Almost everyone is dying to have a job the moment they finish their studies. Traditional work hours range usually from eight to nine hours. The reason people work aside from being able to supply their personal needs and their family’s is to be able to save up for the future. However, when you ask people about the concept of being rich, a large number may associate the quality of being rich to being free. These are two different concepts and in this article you are going to see the difference of being rich from being free.

Road to Financial Freedom is Different

It is important to know that it does not necessarily mean that you have to be rich for you to become free. If you set your eyes on being rich, it does not automatically follow that you will become financially free.

People are inclined to believing that they need to work hard and do everything in order for them to become rich and be free.

You have to grasp the fact that these two are two different things and cannot be equal to each other. There are rich people but they are not considered as free. Yes, they do have wealth – but that wealth is something that can be exhausted easily once they stop working. The underlying reason for such situation is that they were not able to set it up properly.

Hence, the road to financial freedom differs from the road to riches. Each requires a whole different approach to be attained.

Active versus Passive Income

First, you have to know the meaning of these two terms. Active income refers to the income that a person receives after performing a particular task or giving a certain service. Common sources of active income are salaries, bonuses, and even the income of your business. On the other hand, passive income represents the earnings an individual gets from an enterprise, a property or a partnership where the person does not actively engage or is not actively participating in order to obtain profits.

For this reason, your sources of income must be proportionate to your goals. In order to accomplish your goals, you have to understand clearly your earning methods.

Financial Freedom is a Vehicle to Break Lose from Full-Time Working

Rich people have the money because they work. Once they stop working, they might find their funds insufficient to maintain their lifestyle for too long. The concept of financial freedom revolves around the thinking that you do not have to work any longer for you to receive income. Therefore, you need not to worry about money any longer.

Financial freedom is then regarded to be a lifestyle design. You have to design your life the way you desire to live it.

Conclusion

All individuals must aim to be free instead of becoming rich. The primary goal is to get more money coming in and that can happen by letting your assets work for you instead of working for money all throughout your life. By investing your money, your goal of becoming financially free can be a dream coming true.

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Generally, there are three types of market condition – the downtrend, uptrend, or ranging. Knowing the type of trading environment you are into is advantageous on your part, especially if you know the various tools and strategies you need to employ.

In this article, you are going to learn more about trading environments.

Why is it necessary to know trading environments?

There are a number of reasons why knowing the trading environments matters. Here are a few of the known reasons:

It is vital to know the type of trading environment an investor is in since the technical analysis tools, systems and strategies that he or she would employ will greatly depend on the market environment. The different types of market require different techniques and the method you have used in one instance would not necessarily hold effective to another market.

If you are also trying to redeem yourself from a bad performance, it is advisable that you detach yourself first from trading and observe the market from afar. This one can help you focus on determining the kind of market environment and find out the right momentum for you to trade accordingly.

What are the indications that a trader considers the trading environment before making a move?

Trading is like going to war. The foolish trader always rushes without having a concrete plan. On the contrary, a wise trader would get adequate information about the present surroundings and the conditions and then strategizes on how to do the attacks in order to win the battle.

If you are able to do this, you may expect of the following results:

Be able to maximize the power of your system and take advantage of its profitability.

Be able to choose a trend-based strategy to be victorious in your trading goals.

Be able to trade without being fearful. It does not mean that you are overconfident, but it is more like being able to execute a trade since you are certain of your move and the kind of market you would like to conquer.

Be able to determine a number of opportunities since you know which techniques are appropriate to use and be able to figure out the precise indicators as needed by the situation.

Conclusion

Experts are saying that the most common mistake a trader would commit is that they are not aware of the type of environment they are trading in. For a trader to be successful in his or her trading endeavor, he or she must be able to identify this area to be able to take full advantage of the opportunities the market holds. A trader can spot these chances if he or she is able to determine the type of environment existing in that particular period.

Alright! If you want to be updated with the latest news about the latest market news and updates, subscribe now! Trade12 is here to answer any question regarding online trading, commodities, stocks, technology, and economy. Sign up for an account at Trade12.com or you can even download the Trade12 app. Available for both iOS and Android devices.